The Best Residential Real Estate Investment These Days Rests With Detached Houses, If You Can Find One

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If you’ve been reading my blogs over the past fifteen years, you will know that my life has been built around the bricks and mortar that are “Condo Land” (Toronto’s condo market).

Throughout all my adult life, I’ve actually never lived in a “house“.

I’ve always thought that I had to live “right in the heart of the city” and have done so but then I realized that I don’t even like condos!

That’s somewhat ironic from a guy who’s entire career has been built on promoting the lifestyle and selling and/or buying the residences.

I’ev seen the industry develop from its infancy and that “inside” and intimate view of the business is what has given me the foundation on which to turn away from condos.

I redefined my blog from www.simplycondos.com to www.simplycharles.com as I drifted away from my core focus, which was originally to “sell” pre-construction condos for developers, and then I introduced Buyer Agency to Condo Land in 2000 and the rest is history.

The sad truth today is that the industry disappoints me as it has totally “missed its mark“!

Instead of delivering the most sacred of thing . . . . . “homes“, condos shifted to “investment” to be sold much in the same way that most commodities are sold, but within an industry that was not set up to regulate the international free flow of money in search for solid investments.

Once you start making money (real money) and seeing the challenge it is to then keep and/or build on it from there, you realize that keeping it is even harder than making it.

With the introduction of the Internet, real estate investing opened up to the world and Toronto, globally has long been a very immigrant friendly city with foreign investment made easy.

Then, in the early 2000’s, developers introduced another quirk to their marketing approach by offering buyers the opportunity to “resell their unit before the building even ‘Registers‘” and Condo Land literally erupted.

During the past decade, if you wanted to get rich all you had to do was take three short courses at real estate school and jump into the “ponzi scheme” that is Condo Land.

Oh, Condo Land isn’t really a ponzi scheme but usually “if it walks like a duck, quacks like a duck, and acts like a duck . . . it is not a bad bet to go with it being a duck”!

Assignments” as they are known in today’s vernacular simply allow the buyer of a condo unit to sell it without ever having taken ownership.

You don’t own condo real estate until the building is “Registered” in the Land Titles office and title “deeds” are given to each buyer.

So here you have developers pre-selling condo units (the average price is well over a half million dollars) with the “legal authority” to “flip” your position within the original Agreement of Purchase and Sale on to another buyer (with a built in profit to you).

And when the building “Registers” the Land Registry Office logs the names of the buyer and seller but not any “Assignors” (people that “assigned” their units as invited by the developer to do).

How many of these original buyers do you think, realizing that their names appeared nowhere in the documented record, figured that they had better pay income tax on those profits?

Well, it is proving not too difficult for the Canadian Government (Canada Revenue Agency – “CRA”) to realize that what they had here was an unregulated commodities market that way paying untaxed returns!

The real challenge here is that so many units in Condo Land have been sold to international investors many of whom living in Hong Kong, Mainland China, and other Asian countries that collecting those taxes will be a challenge.

It really is not difficult for CRA to track down this mass of potential “tax fraud perpetrators” by simply auditing each development.

Assignment Agreements have to have attached the original Agreement of Purchase and Sale because the Assignee is accepting all the legal obligations set out for and accepted by the original purchaser.

Condo Land lawyers had web sites teaching investors how to do Assignments (they would get the client of course).

Are you getting a glimpse of what has driven the dysfunctional result, which has given us a glut of unsold and overpriced condo units today and a heavy, constant stream of new projects still pouring onto the scene!

I never was big on assignments and consistently advised my global clients to avoid them as they are complex under law and if not handled properly can end up blowing up in your face especially if you need bank financing.

The bank will not value the property at the assigned price!

With Condo Land units running at over $800 – $1,000 for entry level condos, coupled with the shadow inventory of unsold suites, and rental income not “carrying the investment” without supplementing the mortgage, I’m out of the investment game here in Condo Land.

I’ve looked all over the Province of Ontario for local investments (I like to be able to see my properties) including mixed us commercial buildings in small towns, tenanted properties and other commercial alternatives but I still like residential so I’ve turned my sites on upscale detached homes in prime locations.

Developers just don’t seem to be building detached houses any more and the logic is quite simple.

They can build from three to five townhouses to every two detached houses and if they can change the zoning to high rise the numbers of dollars return goes up exponentially.

The basic laws of “supply and demand” tell you that there is security underlying this approach to investing.

Now, this is almost impossible to do if you can’t invest upwards of a million dollars any more anywhere close to Toronto.

I’m a very conservative investor and I have chosen Oakville Ontario, an upscale city about forty five minutes drive southwest of Toronto.

It is said that much of Toronto’s wealth is moving to Oakville and when I see the magnificent homes along the lake running in the $10 Million to $15 Million range, I can believe it.

The first three important things in investing in detached real estate is “location, location, location” (in condos it is “developer, location, developer“) and my number one rule is always “invest in the best that your budget can handle“.

So, I’m focusing all of my efforts to investing only in Oakville and over the past year of researching this dynamic city I’ve educated myself sufficiently from a hands-on perspective (I’ve bought myself without using other Realtors doing to tough day to day slugging of actually becoming knowledgeable on the market) to offer my Buyer Agency services.

I’ve be blogging extensively this year on the various communities that form Oakville so the educational merits of my work will remain available to global investors and local buyers alike.

Buying real estate is not about doing the slugging yourself but rather finding a skilled negotiator that respects the integrity of “agency” and legitimately goes to work for you when you are buying that dream home.

With me you can rest assured that the buying experience will be a totally professional and enjoyable one.

So that’s about it for today and for 2015.

May 2016 bring you all the happiness and financial security that real estate investing can bring you.

I’m Charles

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